Northern California still hosts the world's largest cluster of life sciences companies, but its lead could erode if public officials fail to improve the state's business environment, an industry organization warned in a report being issued today.

Government policies must support companies through the costly process of bringing products to market, the trade association BayBio concluded.

The region's 900 life sciences companies have produced 393 marketed drugs and other products to date, employing 90,000 people for a total payroll of more than $6 billion, the group said in the report, BayBio: Impact 2007.

Those companies created 6,000 jobs over the 12-month period studied, the report found. It estimated the sector's average annual wage at $68,000.

Bay Area life sciences companies have 400 experimental drugs on the runway toward approval, BayBio President Matthew Gardner said. That could mean more manufacturing plants and more jobs for California, but other regions are offering incentives to lure the business away, he said.

BayBio argues that government policies should recognize the high risk, expense and long timelines that the development of drugs requires. The report says state legislators should create tax incentives for biotechnology companies, streamline drug plant approval processes, strengthen science education for California schoolchildren and take other steps to encourage life sciences companies to expand here.

Gardner said biotech companies that once mainly hired doctors and scientists while they worked toward Food and Drug Administration approval of their first products now need employees in a wide range of occupations, including salespeople, accountants and manufacturing workers. But those jobs may go to other states or such countries as India and China.

"The threat to California is that pieces of that growth may get outsourced," he said.

However, California's share of biotechnology jobs has increased from 1995 through 2005 despite the state's supposedly inhospitable environment, said Jean Ross, executive director of the liberal California Budget Project. While the industry calls for tax breaks, California faces a $5 billion budget shortfall next year, she noted.

"If they're not going to pay their fair share, who should pay more so they can pay less, or what programs do they think should be cut?" Ross asked.

BayBio also detailed the resources that make Northern California a magnet for life sciences companies, especially top universities whose scientific insights can be licensed and commercialized. Stanford, UC Berkeley, UC Davis and UC San Francisco are among the top 20 universities ranked by federal research funding support.

The organization, founded in 1990, split into two units in February by creating a second nonprofit division, BayBio, which was organized to permit more-extensive lobbying activities. The original life sciences educational functions of the group are now carried out by a unit called the BayBio Institute.